AI Can Write Code, But It Will Not Replace the Enterprise Tech Stack

The rise of generative AI and agentic AI, with AI coding tools capabilities, has created a powerful bear case against traditional software, SaaS, and technology services companies. The argument is seemingly straightforward: if AI can generate software quickly and cheaply, enterprises should be able to replace much of their existing technology stack, thereby reducing what they spend on software vendors, systems integrators, outsourcing providers, and managed services firms.

I believe that this thesis is substantially overstated. AI will change the economics of technology, but wholesale replacement of the enterprise tech stack is likely to take much longer than many investors expect. There are several reasons why I have come to this conclusion.